Withdrawal – pattern of acceptance of payment by cheque precluding owners from insisting on punctual payment without prior notice
The facts
Norwegian owners chartered their vessel to Belgian charterers which contained the following default provision:
“In default of such payment the owner shall have the faculty of withdrawing the said vessel from the service of the charterers, without prejudice to any claim they (the owners) may otherwise have on the charterers in pursuance of this charter”.
At the outbreak of the Second World War, a dispute arose between the parties regarding the question of safe ports. Pending the outcome of the dispute, the vessel was anchored in Venezuela and the master given instructions not to load.
Hire was due on 27 September 1939.
The parties settled their differences on 25 September 1939 whereupon the owners instructed their master by telegraph to commence loading. This telegraph never reached the master.
Also on 25 September 1939, the charterers dispatched a cheque for advance hire to the owners’ bank in London which only arrived on 3 October 1939. On the same date, the charterers sent a letter to the owners setting out how the amount of hire was computed.
The owners withdrew the vessel upon the strength of the clause referred to above. The charterers’ damages claim was referred to two arbitrators who were unable to agree. The third arbitrator found in favour of the owners but stated a special case for the court.
Findings
Atkinson J found that insofar as the vessel had not been restored to the charterers’ service due to the owners’ miscommunication, there was no obligation to make payment and therefore no right to withdraw.
In any event, he found that on a proper interpretation of the clause that late payment by a few days did not constitute a breach serious enough to give rise to the right to cancel. In this regard he relied on a judgement of Bigham J in Nova Scotia Steel Company Ltd v Sutherland Steam Shipping Company.
Thirdly he found that the off-hire hire clause offered protection to the charterers.
In the Court of Appeal, Tucker LJ disagreed with Atkinson J on all 3 points.
On the question of the charterers’ right to withhold hire he pointed out that the four text books dealing with this point were equally divided. In his view, the decision of Privy Council in French Marine v Compagnie Napolitaine was against the proposition.
In his view, the default provision, by its clear terms, gave the owners the right to withdraw when payment was not received timeously.
He did not consider that the circumstances fell within the terms of the off-hire provision.
Bucknill LJ agreed with Atkinson J on the first two grounds relied upon. He did not consider it necessary to decide the off-hire point.
Insofar as the third member of the panel, Scott LJ was indisposed and there was disagreement between the two remaining judges, the judgment of Atkinson J was allowed to stand with leave given to appeal to the House of Lords.
In the House of Lords (Lords Porter, Wright, Uthwatt, Du Parcq and Morton) the owners’ appeal was dismissed.
Speeches were delivered by all the Lords and the general trend in all the speeches was to disagree with the two findings of Atkinson J but to find that the course of conduct between the parties i.e. the dispatch of a cheque from Brussells to the owners’ London bank constituted a course of conduct by which the owners were taken to accept the risk of a delay in the payment process.
Lord Du Parcq’s reasoning was that if the owners were prepared to accept a risk in delay in clearing the cheque which was regularly sent, they accepted the risk of delay in postage which occurred as a fact in this case.
The House expressly disapproved of the approach of Bigham J in Nova Scotia where he treated the delay of a few days as of no consequence.
Commentary
The most convincing judgement is that of Tucker LJ in the Court of Appeal.
It was not shown that during the entire history of the charter that payment was ever made late. Neither was there any evidence how long it took for the cheques to clear. Accordingly, there was no waiver of the right to punctual payment.
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